Friday, 12 May 2017

On
Tuesday, a former Secretary of State for Wales told
us that scrapping the pensions triple lock before 2020 would be an act of
bad faith, given the promise which he and his party made only two years ago. My first reaction was that, given Mrs May’s
clear and intense dislike of opposition to anything she says from the
opposition parties let alone from her own side, Crabb has obviously written off
his chances of returning to the Cabinet any time soon.

There
is one thing that he has learned from his leader however, and that is the art
of making policy U-turns. Unless I’m
very much mistaken, this is the very same Stephen Crabb who argued
strongly last year, just after the
Tory leadership election, that the pensions lock should be scrapped, or at the
very least modified, immediately.
Clearly, changing it two years after promising it would be in place for
five is ‘bad faith’, but changing it only one year after making that promise is
entirely reasonable. But then, when he made his statement last year, he wasn't expecting to be facing the electors quite so soon, and might have thought that they'd have a bit more time to forget the decision. The U-turn might suggest that he is from
the same planet as May after all, but if he wants to get on, he probably needs
to co-ordinate his policy flip-flops so they coincide with May’s, rather than conflict.

There's another aspect to this as well. If dropping one promise three years early is a sign of bad faith, why is it then OK to drop other promises? On the basis of that argument, the manifesto for the first three years would have to simply carry forward the pledges made in 2015, but part of the reasoning for holding an election at all is surely so that May can free herself from all commitments made by the Conservative Party and implement the UKIP ones a manifesto more to her liking instead.

Anyway,
to the substance of the matter. My recollection
of the reason for introducing the triple lock in the first place was that
pensioners had lost ground in relative terms over the period since Thatcher
scrapped the link with earnings, and the intention of the policy was to restore
their relative position. There has been
some criticism recently that, as a result of the policy, pensioner income is
growing faster than income for other people – but that was precisely the
intention. The question should not be ‘are
pensioner incomes growing faster?’, but ‘has their relative position been
restored yet?’ In any rational world,
the question of whether the triple lock should be retained would be related
directly to determining a target ratio between pensions and earnings and then
establishing whether that has been achieved.

When
that point has been reached, it would seem entirely reasonable to me to re-open
the debate about how pensions increases should be calculated and how we ensure
that the relative position of pensioners should be maintained. I haven’t done the sums; my feeling is that
we’re probably not there yet; but maintaining the triple lock indefinitely would
result in a significant target overshoot over time. But it’s as though the politicians have all
forgotten the origins and rationale for the policy.

The
policy is promoted as something which will appeal to pensioners, and attacked
as something with which young working people are being burdened. That is completely at odds with reality. I’m not at all convinced that Einstein ever
said that compound interest is the most powerful force in the universe, but it
certainly is a powerful financial force.
And it means that the biggest beneficiaries of a triple lock maintained
indefinitely are not current pensioners, nor those about to retire, but those
who haven’t even been born yet.

I
don’t think that it’s right or sensible to maintain the policy for ever, but it
would be helpful to have a more informed debate about the objectives of
pensions policy rather than an attempt at point-scoring between those who are targeting older voters and
those targeting the young. It’s another
example of the froth of modern politics.